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Cecile Corral

Jo-Ann Stores Readies Overhaul

Home Decor Departments to Reset with Smaller but Updated Assortments

Even as he prepares to leave his posts as Jo-Ann Stores chairman, ceo and president as soon as a successor is appointed, Alan Rosskamm is spearheading an ambitious four-part plan to turn around the company after a very poor performance in fiscal 2006. The $1.9 billion retailer will “reduce inventory, restore gross margins, control expenses and increase sales,” Rosskamm said during the company's earnings conference call earlier this month.

“We are well into the process of reducing inventory, but we still have much to do,” he continued. “We have been aggressively promoting excess inventory and clearance. We are also taking measures to restore gross margins. We expect this improvement to come through tighter purchasing disciplines on fashion and seasonal categories, reduced end-of-season clearance sales, as well as more discreet coupon usage and more disciplined promotional pricing guidelines.” One of the most important restructuring initiatives the retailer is embarking on is its merchandise assortment project, which it refers to as “MAP”. It involves clearing additional inventory to make more room for better performers. The MAP also calls for tighter scheduling of departmental resets. Home décor textiles and finished seasonal goods are among the poorest performers as of late and as a result will have less shelf space. Craft components have done better so they will be getting more space at the stores. “We expect these updated assortments to drive traffic and increase profitable sales in the second half of the year,” said Rosskamm, who added that this store reset is scheduled for June. He noted that while home décor textiles and finished seasonal goods are down-trending, “they are still profitable.”

Admittedly adding rather than subtracting expense in the first half of the year will be the opening of Jo-Ann's third distribution center in Alabama in April, “due to initial stocking,” he said. But the rewards will come in the second half of the year when it “will allow us to flow product more cost effectively, reduce freight costs and avoid auxiliary storage expenses,” he added. “Of course, flowing less total merchandise this year will also reduce distribution expense.”

Advertising in fiscal 2007 will see the curtailing of newspaper inserts and fewer promotional events, some of which have not proven to be productive.

When asked by investors if coupons would still be offered by the retailer, Rosskamm said, “We're tightening things up a bit, but certainly not eliminating coupons.”

Another top priority amid all these changes is the search for a new ceo, president and chairman.

Originally, Rosskamm was going to retain his chairman post. But after learning that “a number of candidates with prior ceo experience were reluctant to consider a position where they would have to report to the long-term former ceo,” he explained, “this is understandable, and recruiting a seasoned retail executive for the chairman, ceo and president position remains our top priority.”

He said he would be “disappointed” if someone is not found to fill this top post by end of the second quarter.

There is also a parallel search for the cfo position, “a search that includes internal candidates, but frankly we have slowed that search to focus on the ceo,” he added.

The search for a new head merchant is also on hold. Jo-Ann Stores has opted to leave that decision to the incoming ceo.

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